Image courtesy of Flickr_Pink Sherbert Photography

In Focus Spring 2020

The COVID-19 pandemic has forced an international shut down of most everyday life and business.

The Chancellor has already announced two rounds of measures to support the UK economy in addition to the emergency budget.

In the Spring issue of In Focus we also look at five years of pension flexibility, the national living wage vs new state pension and shifts in the savings landscape.

INFOCUS

Click here to download your copy.

 

Image Courtesy of Flickr_Ishan Manjrekar

Covid-19 measures: Main provisions for the self-employed

On Thursday 26 March, Chancellor Rishi Sunak made his long-awaited statement about the Covid-19 government support scheme for the self-employed, called the Self-employment Income Support Scheme (SEISS). Reports suggest that the announcement had been slow to arrive because of the greater difficulty in structuring and running a scheme that relied on annual information (via tax returns) and could not operate via the PAYE system.

Main provisions for the self-employed

The main points from the Chancellor’s statement and accompanying press release are:

  • The SEISS will pay a directly payable taxable grant to the self-employed (including members of partnerships) based on 80% of profits averaged over the last three tax years (or shorter periods if self-employment started after 2016/17), subject to a maximum of £2,500 a month. In a recent briefing note from the Institute for Fiscal Studies, it was suggested that the £2,500 figure (which also applies to the employees’ Job Retention Scheme) is the maximum payment that will be made, not the maximum earnings that are protected, i.e. 80% of up to £37,500 of profits ([£37,500 x 80%] /12 = £2,500) will be covered.
  • The initial payment term of the SEISS grant will be “at least three months”.
  • The payment of the grant will not prevent the claimant from continuing to work.
The SEISS will be restricted in three ways:
-Self-employment must provide the majority of the claimant’s income. It is unclear how this is calculated.
Trading profits either:
  • are less than £50,000 in 2018/19; or
  • trading profit was less than £50,000 averaged over the three tax years from 2016/17.

According to the Chancellor, these thresholds mean the scheme covers 95% of the self-employed. The corollary is that it creates a cliff edge at £50,000, a figure that appears elsewhere in the tax system (e.g. the higher rate tax threshold).

  • The claimant must have submitted a 2019 tax return (covering the 2018/19 tax year). As a concession, any later filer will have four weeks to submit their overdue return if they wish to be included in the scheme.

HMRC will use their existing information to assess eligibility and contact individuals directly, requesting completion of “a simple online form”. A gov.uk webpage gives more details, but is somewhat confusingly headed “Claim a grant through the coronavirus (COVID-19) Self-employment Income Support Scheme”. The “don’t call us, we’ll call you” approach is aimed at preventing HMRC being overwhelmed with telephone queries, as has happened with the DWP’s Universal Credit system.

  • Payments from HMRC should start at the beginning of June. The initial sum will represent three months’ cumulative payments. Until then the self-employed can claim Universal Credit. In his statement the Chancellor said Universal Credit could give a self-employed person with a non-working partner and two children, living in the social rented sector, support of up to £1,800 a month.
  • Anyone whose self-employment started after 5 April 2019 and thus has no self-employed earnings recorded with HMRC cannot benefit from the scheme and must rely on Universal Credit.
  • Those who operate through one person companies are not covered by the scheme as, despite the media label often given to them, they are not self-employed. The Treasury press release states that such people “will be covered for their salary by the Coronavirus Job Retention Scheme if they are operating PAYE schemes”. The use of the word ‘salary’ is key here, as many one person companies route the bulk of their employee’s remuneration via dividends to reduce National Insurance liabilities.

In his closing remarks the Chancellor noted that “…in devising this scheme … it is now much harder to justify the inconsistent contributions between people of different employment statuses”. This was a subtle way of suggesting that National Insurance contributions will have to rise for the self-employed once the crisis is over.

Coronavirus Act

The day before the Chancellor’s latest statement, the Coronavirus Act 2020 received Royal Assent. This 348-page Act deals with a broad range of Covid-19 related measures (many of which exclude Scotland because of its devolved powers), including:

  • Food supply.
  • Statutory Sick Pay (SSP) modifications, e.g. funding of the employer’s liabilities.
  • Suspension of the complex abatement rules that either reduce or suspend NHS pensions on an individual’s return to work.
  • Uprating of working tax credit.
  • Protection from eviction for residential tenancies to 30 September 2020.
  • Protection from forfeiture for commercial tenancies to 30 June 2020.

The explanatory notes for the original Bill (introduced on 19 March ) are here.

Updated government Covid-19 guidance on business support is here and for employees is here.

Image courtesy of Flickr_Pink Sherbert Photography

Covid-19 Measures – March 2020

The 11 March Budget from the new Chancellor, Rishi Sunak, included £7 billion of expenditure targeting the impact of Covid-19 on employees, the self-employed and businesses. On 17 March a further raft of measures was announced, amounting to an additional £20 billion of support expenditure plus £330 billion of loan guarantees. By 20 March another round of support was announced of such size that no price tag was attached. On 26 March the awaited package for the self-employed was announced.

The Chancellor’s 17 March statement was accompanied by a repeated promise that he would do “whatever it takes” to counter the impact of the virus. Three days later, his second statement gave an indication of how large ‘whatever it takes’ is becoming, with potentially more to come.

We have pulled together a round-up of the key announcements so far for businesses and individuals including useful links to government sites.

Measures for business

Coronavirus Job Retention Scheme (CJRS)

Some form of job support scheme had been expected after the 17 March announcement and the CJRS is similar to schemes that have already been set up elsewhere in Europe. Under the CJRS, “HMRC will reimburse 80% of furloughed workers wage costs, up to a cap of £2,500 per month’. In this context ‘furloughed workers’ are non-working employees who are kept on the payroll, rather than being laid off. The employer has to designate these employees and submit relevant information to HMRC via a “new online portal”.

Statutory sick pay (SSP)

Businesses with fewer than 250 employees will be refunded the full cost of providing SSP to any employee off work for up to 14 days because of coronavirus.

Loan guarantees

A government-backed loan guarantee scheme announced in the Budget has since been twice enhanced.  The Government will now provide loan guarantees up to “an initial” £330 billion for all sizes of businesses:

  • For large firms, the Bank of England is launching a Covid Corporate Financing Facility (CCFF), which “will provide funding to businesses by purchasing commercial paper of up to one-year maturity, issued by firms making a material contribution to the UK economy”.
  • For small and medium sized businesses The loan limit on the Coronavirus Business Interruption Loan Scheme (originally announced in the Budget at £1.2 million) is now £5 million. No interest will be due for the first twelve months and lender-levied fees will be covered. The scheme will be delivered through commercial lenders, backed by the British Business Bank. Eligible SMEs must be UK-based with turnover of not more than £45 million and meet “the other British Business Bank eligibility criteria”.

For the period between 20 March 2020 and 30 June 2020, businesses will not be required to make a VAT payment. Instead they will be able to defer this payment until the end of the 2020/21. VAT refunds and reclaims will be paid by the government as normal. No applications will be required as the process will be automatic.

For the self-employed, self assessment income tax payments due on the 31 July 2020 (the second payment on account for 2019/20) will be deferred until the 31 January 2021. This also will not require an application. Penalties and interest for late payment will not be charged in the deferral period.

Business Rates Retail Discount 

All shops, cinemas, restaurants, music venues and business operating in the leisure and hospitality sectors will have no business rates to pay in 2020/21.

On 17 March the Chancellor also promised an additional cash grant of “up to £25,000 per business” to businesses with a rateable value of less than £51,000 – i.e. those that would have benefited from the old version of Business Rates Retail Discount Scheme.

Businesses already eligible for small business rates relief

There will be a flat £10,000 cash grant for each business that already benefits from zero or reduced business rates because of small business rate relief.

Insurance cover

Although the government has not required the leisure and hospitality businesses to close, on 17 March the Chancellor said that “for those businesses which do have a policy that covers pandemics, the government’s action is sufficient and will allow businesses to make an insurance claim against their policy”. However, pandemic cover is not a feature of most business disruption cover, a point underlined by the Association of British Insurers in a statement it issued on 17 March.

Off-payroll working in the private sector (IR35)

Also on 17 March, the Chief Secretary to the Treasury, Steve Barker, said in a statement to the House of Commons that the start date for the new IR35 tax rules would be deferred to 6 April 2021.

Time to Pay (TTP)

In the Budget, the Chancellor announced that HMRC would scale up its Time To Pay service, giving businesses and the self-employed the chance to defer tax payments.

Government guidance for employers and businesses is here and business support details are here.

Measures for individuals

Mortgage holidays

For people who find themselves in financial difficulties because of coronavirus, mortgage lenders will offer at least a three-month mortgage holiday.

Statutory sick pay (SSP)

SSP is currently paid at the rate of £94.25 a week, rising to £95.85 from April. It is now available to employees from day one, instead of day four, for those who are suffering from the virus or who have been advised to self-isolate. So far there has been no change in the minimum earnings threshold for SSP (£118 a week currently, rising to £120 a week in 2020/21).

Individuals ineligible for SSP

Self-employed and gig economy workers generally do not qualify for SSP. Instead they may be entitled to Contributory Employment and Support Allowance.

Covid-19 sufferers and self-isolators will be able to claim the benefit from day one instead of day eight. The minimum income floor in Universal Credit (UC) has been temporarily removed to ensure that time off work because of sickness is reflected in benefits.

For 12 months from 6 April 2020, the standard allowance in Universal Credit (UC) and the basic element in Working Tax Credit (WTC) for will be increased by the equivalent of about £20 a week over and above planned annual uprating (which were to £323.22 per month for UC for age 25 and over and £1,995 a year for WTC). This effectively brings UC into line with the rate of SSP. The change will apply to all new and existing UC claimants and to existing WTC claimants.

Housing benefit

Housing benefit and the housing element of UC will be increased so that the Local Housing Allowance will cover at least 30% of market rents.

Hardship Fund

The Chancellor announced in the Budget a £500 million Hardship Fund, which would be distributed to Local Authorities so that they could support the vulnerable.

Government guidance for employees is here.

Main provisions for the self-employed

On Thursday 26 March, Chancellor Rishi Sunak made his long-awaited statement about the Covid-19 government support scheme for the self-employed, called the Self-employment Income Support Scheme (SEISS). Reports suggest that the announcement had been slow to arrive because of the greater difficulty in structuring and running a scheme that relied on annual information (via tax returns) and could not operate via the PAYE system.

The main points from the Chancellor’s statement and accompanying press release are:

  • The SEISS will pay a directly payable taxable grant to the self-employed (including members of partnerships) based on 80% of profits averaged over the last three tax years (or shorter periods if self-employment started after 2016/17), subject to a maximum of £2,500 a month. In a recent briefing note from the Institute for Fiscal Studies, it was suggested that the £2,500 figure (which also applies to the employees’ Job Retention Scheme) is the maximum payment that will be made, not the maximum earnings that are protected, i.e. 80% of up to £37,500 of profits ([£37,500 x 80%] /12 = £2,500) will be covered.
  • The initial payment term of the SEISS grant will be “at least three months”.
  • The payment of the grant will not prevent the claimant from continuing to work.
  • The SEISS will be restricted in three ways:
    • Self-employment must provide the majority of the claimant’s income. It is unclear how this is calculated.
    • Trading profits either: are less than £50,000 in 2018/19; or trading profit was less than £50,000 averaged over the three tax years from 2016/17.

According to the Chancellor, these thresholds mean the scheme covers 95% of the self-employed. The corollary is that it creates a cliff edge at £50,000, a figure that appears elsewhere in the tax system (e.g. the higher rate tax threshold).

  • The claimant must have submitted a 2019 tax return (covering the 2018/19 tax year). As a concession, any later filer will have four weeks to submit their overdue return if they wish to be included in the scheme.

HMRC will use their existing information to assess eligibility and contact individuals directly, requesting completion of “a simple online form”. A gov.uk webpage gives more details, but is somewhat confusingly headed “Claim a grant through the coronavirus (COVID-19) Self-employment Income Support Scheme”. The “don’t call us, we’ll call you” approach is aimed at preventing HMRC being overwhelmed with telephone queries, as has happened with the DWP’s Universal Credit system.

  • Payments from HMRC should start at the beginning of June. The initial sum will represent three months’ cumulative payments. Until then the self-employed can claim Universal Credit. In his statement the Chancellor said Universal Credit could give a self-employed person with a non-working partner and two children, living in the social rented sector, support of up to £1,800 a month.
  • Anyone whose self-employment started after 5 April 2019 and thus has no self-employed earnings recorded with HMRC cannot benefit from the scheme and must rely on Universal Credit.
  • Those who operate through one person companies are not covered by the scheme as, despite the media label often given to them, they are not self-employed. The Treasury press release states that such people “will be covered for their salary by the Coronavirus Job Retention Scheme if they are operating PAYE schemes”. The use of the word ‘salary’ is key here, as many one person companies route the bulk of their employee’s remuneration via dividends to reduce National Insurance liabilities.

In his closing remarks the Chancellor noted that “…in devising this scheme … it is now much harder to justify the inconsistent contributions between people of different employment statuses”. This was a subtle way of suggesting that National Insurance contributions will have to rise for the self-employed once the crisis is over.

Coronavirus Act

The day before the Chancellor’s latest statement, the Coronavirus Act 2020 received Royal Assent. This 348-page Act deals with a broad range of Covid-19 related measures (many of which exclude Scotland because of its devolved powers), including:

  • Food supply.
  • Statutory Sick Pay (SSP) modifications, e.g. funding of the employer’s liabilities.
  • Suspension of the complex abatement rules that either reduce or suspend NHS pensions on an individual’s return to work.
  • Uprating of working tax credit.
  • Protection from eviction for residential tenancies to 30 September 2020.
  • Protection from forfeiture for commercial tenancies to 30 June 2020.

The explanatory notes for the original Bill (introduced on 19 March ) are here.

Updated government Covid-19 guidance on business support is here and for employees is here.

Image Courtesy of Patrícia Almeida on Flickr

Rest assured, we are open for business

In response to the rapidly developing Coronavirus COVID-19 situation we would like to ensure clients that our business can, and will, continue to operate remotely effectively. We have tested our business continuity plan and all direct lines will be transferred to mobiles – and all staff have full remote access to IT systems to ensure we operate business as usual.

As of today, staff at PK Partnership have been working remotely from home, and we will be operating a skeleton staff in the office. We have rearranged all face-to-face client visits and will be available by phone and email.

We are monitoring this fast moving and ever-changing situation along with our insurer and financial partners.

PK Partnership Mortgage

Budget Snapshot 2020

The Budget Statement was delivered today at 12.30pm by the new Chancellor of the Exchequer, Rishi Sunak.

The last Budget was in November 2018. Records suggest the last calendar year before 2019 without a UK Budget was 1768, the year James Cook set sail on his first voyage to the Pacific.

 

About the Budget

 

The Budget is a report presented each year by the Chancellor to Parliament and the nation. The primary role of the Budget is to control public finances by setting out how much tax the Government will collect, how much the Government will borrow and how much the Government will spend. This snapshot is not an in-depth analysis but aims to give you a quick summary of the key points announced by the Chancellor from the dispatch box.

 

Main Headlines from the Speech

Introduction

 

The Chancellor describes this Budget as delivering on the change promised in the General Election.

 

Coronavirus

 

  • £5 billion emergency response fund to support the NHS and other public services.
  • Statutory sick pay will be payable from day 1 to all those who choose to self-isolate even if they don’t have symptoms. Sick notes will be available from NHS 111.
  • Contributory employment and support allowance claimants will be able to claim sick pay on day one not after a week.
  • £500 million fund for councils to help vulnerable people.
  • SMEs with fewer than 250 staff will be refunded for sick pay payments for two weeks.
  • SMEs will be able to access business interruption loans of up to £1.2 million guaranteed up to 80% by the Government.
  • Business rates will be abolished for firms in retail, leisure and hospitality sectors with a rateable value below £51,000.
  • There will be a statement by the Health Secretary, Matt Hancock, in the Commons tonight at 7.00.pm

 

Economic forecasts

 

The forecasts do not take into account the effect coronavirus may have on the economy.

Growth

2020: 1.1%

2021: 1.8%

2022: 1.5%

2023: 1.3%

2024: 1.4%

Inflation

2020: 1.4%

2021: 1.8%

2022: 2.0%

2023: 2.0%

2024: 2.0%

Borrowing forecast (not expressed in cash terms)

2.1% of GDP in 2019/2020

2.4% in 2020/2021

2.8% in 2021/2022

2.5% in 2022/2023

2.4% in 2023/2024

2.2% in 2024/2025

Debt forecast to go down from 79.5% of GDP this year to 75.2% in 2024/2025.

Review of fiscal framework by autumn in view of the global low interest rate environment.

 

Taxation and pensions

 

  • No change to income tax thresholds in 2020/2021.
  • NI threshold increases to £9500 from April 2020.
  • NI holiday for employers of veterans in first year of civilian employment.
  • Off payroll working rules (IR35) to be implemented as planned from April 2020.
  • Tapered annual allowance: income thresholds to be increased by £90,000 and minimum tapered annual allowance to be reduced to £4000 from April 2020.
  • Lifetime allowance to increase to £1,073,100 in 2020/2021.
  • Annual subscription limit for Junior ISAs and Child Trust Funds to increase from £4368 to £9000. ISA limit remains unchanged at £20,000.
  • Legislation to put beyond doubt the calculation of top-slicing relief by specifying how allowances and reliefs can be set against life insurance policy gains and will apply to all relevant gains occurring on or after 11 March 2020.
  • VAT to be abolished on women’s sanitary products.
  • Entrepreneur’s relief: lifetime limit reduced to £1 million
  • Stamp duty surcharge of 2% on non-UK residents purchasing residential property from April 2021 to fund rough sleepers fund.
  • Independent Low Pay Commission to have new remit of targeting a National Living Wage of two thirds of median earnings by 2024 which is estimated to be £10.50 an hour.

 

Excise duties

 

  • No increase to beer, cider, wine and spirits duties.
  • No increase to fuel duty.
  • Tobacco duty to increase by RPI + 2% (RPI + 6% for hand-rolling tobacco) until the end of this Parliament. These changes will take effect from 6.00pm this evening.

 

Environment

 

  • Abolition of tax relief for red diesel in 2022 for most sectors except agriculture, rail, fishing and domestic heating.
  • Plastic packaging tax: from April 2022, charge of £200 a tonne on packaging with less than 30% recycled content.
  • 30,000 hectares of trees to be planted and 35,000 hectares of peatland restored.
  • Investment in flood defences to double over the next five years to £5.2 billion.
  • £500 million to increase the roll-out of rapid charging hubs, so that drivers are never more than 30 miles away from one.
  • £800 million to establish two or more Carbon Capture and Storage clusters by 2030

 

Health

 

  • NHS funding to increase by £6 billion over the course of this parliament.
  • NHS surcharge for new arrivals from overseas to increase to £624 with a discount for children.

 

Infrastructure

 

  • Additional funding of £640 million for Scotland, £360 million for Wales and £210 million for Northern Ireland.
  • West Yorkshire to have directly elected mayor who will share extra £4.2 billion with other metro mayors (Greater Manchester, Liverpool City Region, West Midlands, Tees Valley, Tyne and Wear, Sheffield City Region, West of England) for transport investment.
  • £27 billion investment on more than 4,000 miles of roads.
  • £5 billion of funding for gigabit-capable broadband.
  • Additional £1.5 billion to be made available for further education funding.
  • More than 750 staff from Treasury, business and trade departments to move to north of England. More than 22,000 civil servant roles to move outside central London in the long term.

 

Housing

 

  • £1.1 billion from housing infrastructure fund to build around 70,000 new homes in high demand areas.
  • Building safety fund worth £1 billion to be used to remove cladding from tall residential buildings.
  • £650 million fund to help rough sleepers into accommodation
PK Partnership Mortgage

Consider insuring your whisky collection

Fine wine has been a staple investment for investors for a numbers of years and now whisky has become increasingly collectible with investors looking at the market to spur growth in their investments. The value of rare Scotch whisky sold at auction exceeded £16 million for the first time in 2018.

There was a year-on-year increase of 46% compared to the same period in 2017. Compared to 2013, the market has grown 732%, demonstrating the increasing popularity of whisky as an alternative investment to fine wines. In 2018, a bottle of ‘The Macallan 1926 60 Year Old’, broke the world record at auction for a single bottle of whisky, selling for £1.2 million at Christie’s in London.

In 2019, auctioneers unveiled what is believed to be the largest private whisky collection ever to go on public sale. More than 3,900 bottles of primarily single malt Scotch, including very rare bottles from The Macallan, Bowmore and Springbank distilleries. The total value of the collection has been estimated at an auction price of between £7m – £8m. Perthshire based Whisky Auctioneer will sell the collection over two online auctions in February and April 2020.

In 2019, a Vietnamese businessman was revealed as the owner of the world’s most valuable whisky collection. Mr Viet Nguyen Dinh Tuan’s collection comprises some of the world’s oldest, finest and rarest bottles of Scotch and Japanese whisky, with an estimated auction hammer price of nearly £10.8m by valuation experts Rare Whisky.

Whilst whisky may be becoming a more attractive investment option, there are still some considerations to be had before putting your money where your glass is:

Buy what you like drinking – if you buy what you like to drink, even if your investment doesn’t increase in value, you can still enjoy your collection by drinking it. Compared to wine, whisky keeps for longer and will retain its flavour over many years. If it’s stored under the right conditions, you have plenty of time to enjoy it.

Consider collecting in themes – most collectors start out by buying whisky from a particular distillery. Other collectable themes include; a particular area or production technique or even a certain type of whisky (Bourbon, Scotch, Japanese or Irish).

Buy Limited edition – the scarcity of the bottle is what really impacts its price. A lot of distilleries (and certainly those that are well-known), will produce limited edition runs of certain releases. Like any collectible item, a rare whisky will fetch a higher price than those that are available to everyone. Another tip is to look out for bottles from ‘lost’ distilleries, these are distilleries that have closed down or no longer produce whisky. As these bottles become harder to source, their collectability and value rises.

Don’t forget about storage – it’s important that like fine wine, you correctly store your collection. Whilst whisky is less volatile and easier to store, if the right precautions are not followed then it can degrade. Some things to consider are:

  • Store the bottles upright
  • Keep away from strong sunlight
  • Avoid extreme temperature fluctuations
  • Have a labelling/filing system in place

It’s worth having some form of filing/labelling system for your collection, so it’s easier to correctly identify your bottles. It’s also better to have a filing system for your collection for insurance purposes. In the event of a claim, it’s easier for all parties if you can methodically list out your collection with the related evidence.

Compared to fine wine, whisky is easier to store and a bottled spirit will neither improve nor get worse over time, which means that its value should continue to increase, as the supply of it diminishes. Fine wines are much more sensitive and often require costly investment to ensure that they are stored in optimal conditions. Investing in rare spirits such as whisky, can offer a potentially safer and lower-maintenance choice compared to the traditional fine wine investment market.

Consider insuring your collection

A standard homeowner’s policy isn’t designed to fully insure an extensive or expensive whisky collection.

Instead, in order to insure your whisky collection, you should consider purchasing an insurance policy that will cover your whisky collection for damage, spoilage or loss. As well as ensuring that you aren’t underinsured and knowing that your collection is adequately covered.

To arrange a review of your personal insurances including whiskey collections, wine collections, high value performance cars and art, please contact Anjana Pankhania on 020 8681 4994 or anjana@pkpartnership.co.uk

 

 

 

Image Courtesy of Patrícia Almeida on Flickr

Are your contents underinsured?

With some households having spent hundreds, if not thousands of pounds on gifts during the Valentine’s period, the risk of underinsured contents insurance policies can increase. Were you one of the lucky people?

In 2018, the British public spent an estimated £650m on Valentine’s gifts. Jewellery and clothing being two of the top purchases made by the British public ahead of the romantic day.

With UK Google searches for engagement rings seeing a spike between December and February, it’s a time of year that could see households underinsured with their new and significant purchases.

Different insurers have different ways of dealing with underinsurance. For example, it could lead to policyholders having their claims settlement reduced, or them having to pay an additional premium. In some of the more extreme circumstances, it could lead to a claim being outright rejected.

However, by following a few simple steps, you can avoid the risk of major underinsurance.

Correctly estimate the value of your contents

A common issue with household underinsurance is that homeowners underestimate the value of their possessions. It’s important to remember that not only should high value items be considered, but also the cost of replacing staple items in the home.

With most everyday items, you can find a price online. However, for the more bespoke and high-value items, it is worth getting a professional valuation done. For these high-value items, most homeowners do not get professional valuations or may have never had them valued, leaving them vulnerable to significant underinsurance.

For your everyday items, a good way of ensuring nothing has been missed, is to go from room to room and list everything.

Add expensive new purchases to your policy

With romance in the air, the Valentine’s period sees the purchase of expensive clothing and jewellery increase, and with it the potential to be underinsured. It’s important that these newly acquired items get added to policies as soon as possible.

If these newly acquired items aren’t listed on a policy, should any sort of loss occur, these may not be accounted for when processing the claim. It is worth highlighting that there is no need to list every single purchase, just those of higher value that would have a considerate impact on the policyholder’s insurance. This is because the insurer may need to increase contents sum insured to reflect the new and increased value of the household possessions.

Get regular valuations

For high values items it’s necessary to get regular professional valuations. Even if a policyholder hasn’t made any major purchases, the values of these items is always changing.

In particular, high value items like jewellery are vulnerable to price fluctuations and underinsurance. External factors, such as gold and silver value fluctuations, for example, can quickly change the value of jewellery. Thus potentially leaving policyholders over or underinsured.

Another point to consider is that jewellery can often be purchased abroad, where prices can be significantly cheaper than the equivalent in the UK. Therefore making it much more expensive to replace in the UK.

Check your policy details

It’s imperative that you understand your insurance covers and are clear on the detail of their contents insurance policies, including any exclusions or limits that may exist.

Inner policy limits are significant. Many policies will specify a limit for valuables and each insurer may use a different definition for ‘valuables’. Understanding these definitions will allow you to make decisions on how to correctly assess what suitable sums insured should be.

You should also be clear on whether you own any items for which you may be required to provide evidence of ownership or value in the event of a claim. Many insurers will require evidence in the form of a professional valuation for any item valued over £5,000, although policies should be checked to see what the insurer has specified.

There can be many reasons for households becoming underinsured, however regular and accurate valuations and an understanding of basic policy details will go a long way towards minimising the risk.

To arrange an up to date valuation report on your jewellery please contact Anjana Pankhania on 020 8681 4994 or anjana@pkpartnership.co.uk

PK Partnership cost of financial advice

The outbreak of Coronavirus

The outbreak of Coronavirus in parts of China is a rapidly developing situation and we would strongly advise anyone travelling to the country to look at the guidance issued by the Foreign and Commonwealth Office (FCO) which is updated on a regular basis.

The Foreign Office is warning Britons not to travel to mainland China, unless their journey is essential.

From a travel insurance perspective the British Insurance Brokers Association, which PK Partnership is a member of, has advised they expect that consumers who had purchased travel insurance and travelled before the FCO issued its advice on 23rd January will be covered while in China. Travel insurance includes medical expenses and so treatment costs for a traveller who becomes unwell in China should be covered up to the limit in the policy. This would include anyone who had visited or is presently in Wuhan city or Hubei province but not now for travel into the city or province from elsewhere in China.

For people travelling to Wuhan city or to Hubei province after 23rd January, insurers are now excluding cover since the FCO is advising against travel.

 

Concerned travellers who had booked their trip via a tour operator or travel agent or using a credit card may wish should contact them to see if they can get a refund or have their trip re-arranged.

Please keep a close eye on the Foreign and Commonwealth Office web site.

All travel policies are different in terms of what a travel policy covers and what a policyholder can claim for. If you have any questions relating to your travel insurance arranged through PK Partnership please contact us on 020 8681 4994 and we will be happy to assist.

Image courtesy of Flickr_Sheila Sund

Is it Time to Update Your Jewellery Insurance Valuation?

We have chosen four items of jewellery from four of the top manufacturing brands – items that have been in production virtually unchanged for nearly 20 years – unchanged that is except for the price!!

The price of gold in 2003 was about $450 per ounce and it’s about $1510 per ounce today having peaked around 2012 at $1750 per ounce – so the roughly 350% rise in bullion price over the period in question is a price increase factor but a surprisingly small one in gem set pieces like these. The Cartier ring is quite a chunky piece, but its basic bullion value today is probably about £400 as opposed to approximately £125 in 2003. OK, the VAT rate has risen from 17.5% to 20% in the same period but again that’s had a pretty small effect on the retail price, so that leaves gem stone prices, manufacturing costs and retail profit mark ups as the main ‘culprits’ for the 2.5/3 times price increases.

Diamond prices for good commercial grade stones which these top manufacturing brands would use have largely stalled over the past few years; it’s only the highest quality and rare coloured stones which hit the headlines with their huge prices. And we’re all waiting to see what the effect on retail prices will be when the full impact of the introduction of synthetic diamonds is felt. Also to be taken into account is the effect that internet has had on diamond prices. There are numerous well-established and reliable web sites making available to all millions of unmounted stones at basically ‘trade prices’ (plus VAT) and most with recognised laboratory certificates. The ‘closed shop’ trade only which has prevailed in the jewellery business for centuries is breaking down. The coloured stone market is swamped with cheap, very heavily treated and colour enhanced rubies, sapphires and emeralds that come mainly from the Far East. Another factor is the huge increase in the use of coloured stones that 20 years ago would have been classified as ‘semi-precious’ but are now appearing at serious stone prices.

The stones that have shown a huge increase in price over the past 10 or so years have been natural untreated sapphires, rubies and emeralds – but the stones have to have an independent laboratory certificate stating they are natural colour and untreated to come in to this category. A few exceptional stones of this type – mainly in pretty 1920/1940’s period pieces – have fetched more per carat than decent comparable size commercial grade diamonds.

Manufacturing and jewellery workshop costs in Europe have certainly risen sharply over the past 20 years – as anyone who has had to have jewellery items repaired will know. Nearly all items are still hand made or finished so the cost of making up of jewellery is a big factor in the resulting retail price. The exception to this being the type of items available from online sites and lower grade retailers that are mass produced in the Far and Middle East – usually pretty poor-quality workmanship and poor-coloured stones. The second-hand and auction market for jewellery of this type is very weak – so don’t expect to cover the cost of your Far Eastern travels if you try to sell your purchases back in the UK.

Profit marks up are a big variable – about 30 years ago when I was first involved with jewellery the tacitly accepted mark-up was to double the cost price and add VAT. Now, for a retail shop mark-up can be a whopping 300% to 350% plus VAT. But don’t be too harsh on the retailer – he has frightening fixed overheads and outgoings, and jewellery can be slow moving stock. Also, some jewellery and watch manufacturers do dictate a fixed retail price to the shop for their products. But it’s always worth a little haggle!!

If you had bought any of the four illustrated items back in the very early 2000’s at these prices and had applied an across the board annual percentage increase to cover insurance you might well have ended up in trouble in the event of a claim due to the variable cost factor increases.

Cartier. An 18 carat white gold, diamond and emerald Panthere ring

2003 £26,000

2010 £42,100

2019 £73,000

Van Cleef and Arpels. An 18 carat yellow gold and mother o’pearl 20 motif Vintage Alhambra necklace

2004 £6,210

2012 £10,800

2019 £13,700

Cartier. An 18 carat white gold, diamond and emerald Panthere ring

2003 £26,000

2010 £42,100

2019 £73,000

Van Cleef and Arpels. An 18 carat yellow gold and mother o’pearl 20 motif Vintage Alhambra necklace

2004 £6,210

2012 £10,800

2019 £13,700

Tiffany. A pair of platinum and diamond ‘Victoria’ ear studs

2003 £3,100

2010 £4,925

2019 £8,225

We recommend a review of a jewellery insurance valuation every 3 years. A desktop revaluation is fully acceptable within this timeframe, but a complete revaluation at 5 years especially as the valuation would include a close examination of the condition of claws, clasps and links, is something more and more insurers and brokers now insist on.

Be cautious!

Most of the big brand names like the ones above suffer from faking and copying. Allegedly more Van Cleef and Arpels Alhambra jewellery has been made in the Middle and Far East than in France! All the brands we have illustrated are meticulous in their marking and all their products will have a brand name and in most cases also reference and individual serial numbers, so if you’re shopping for some big name goodies on your Eastern travels be sure to take a good magnifying glass with you!

PK Partnership work with some of the UK’s leading specialist valuers. To arrange an up to date valuation report on your jewellery please contact Anjana Pankhania on 020 8681 4994 or anjana@pkpartnership.co.uk

Wishing you a Merry Christmas from all at PK Partnership

Please note our offices will close for Christmas on 24th December at 1pm and reopen on 2nd January.

 

Instead of posting Christmas cards we will once again be making a donation to our chosen charity OKAS (Old Kampala Alumni Scholarship Fund). Please click here to read progress and success stories from the students themselves.

 

Wishing you and your family a Merry Christmas and Prosperous 2020.

 

Best wishes from all the team at PK Partnership

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